Global Tax Alert | 14 June 2013

European Commission proposes extending automatic exchange of information to cover dividends, capital gains, other financial income and account balances

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On 12 June 2013, the European Commission proposed an extension to the types of information exchanged automatically between national tax administrations of the EU Member States, as part of the EU's fight against tax evasion. Under the proposal, dividends, capital gains, all other forms of financial income and account balances would be added to the list of categories which are subject to automatic information exchange within the EU. This would result in EU Member States sharing as much information between them as a number of them have already committed to provide to the US under the Foreign Accounts Tax Compliance Act (FATCA).

During a press conference Algirdas Šemeta, EU Commissioner for Taxation, Customs, Statistics, Audit and Anti-Fraud, highlighted:

With today's proposal, Member States will be better equipped to assess and collect the taxes they are due, while the EU will be well positioned to push for higher standards of tax good governance globally. It will be another powerful weapon in our arsenal to lead a strong attack against tax evasion.


In January 2013, the Directive on Administrative Cooperation ('DAC') entered into force. This directive references, amongst other things, the automatic exchange of information (if available) on the following five categories of income and capital from 1 January 2015:

  • Income from employment
  • Director's fees
  • Life insurance products
  • Pensions
  • Ownership of and income from immovable property

It was expected that the DAC would be reviewed in 2017, with a view to extending it to cover more categories of income and capital.

Commission proposal

The Commission's proposal accelerates this process, by proposing to introduce automatic exchange of information regarding taxable periods as from 1 January 2014 concerning the following items which are paid, secured or held by a financial institution for the direct or indirect benefit of a beneficial owner who is a natural person resident in a Member State:

  • Dividends
  • Capital gains
  • Any other income generated with respect to the assets held in a financial account
  • Any amount with respect to which the financial institution is the obligor (i.e. legally or contractually obliged to pay) or the debtor, including any redemption payments
  • Account balances

The amended DAC would apply in relation to any income within these categories that is “paid, secured or held by a financial institution.” The data would be collected by financial institutions in relation to income that is beneficially owned by non-resident individuals (natural persons) and then automatically transmitted to the authorities where the individuals reside. The exchanges would take place through the European Common Communication Network (CCN) that is intended to comply with EU data protection rules.

It should be noted that, while the five categories of income already covered by the DAC will only be subject to the automatic exchange if the information is “available,” it is proposed that this exception should not apply to the new items and that automatic exchange would be mandatory for these new categories, resulting in additional filing responsibilities for financial institutions.

The DAC contains a “most favored nation” clause under which EU Member States are bound to provide to any EU partner that requests it, the same level of information as they provide to third countries, if this is more than is provided for under existing EU law. The Commission notes that the legislative proposal to amend DAC should ensure that the scope of automatic exchange of information between EU Member States is as wide as the scope of FACTA. As such, there would be no need for the most favored nation clause to be triggered. The Commission proposes that the condition of “availability” for the five already existing categories of income and capital be re-assessed during the review of the DAC in 2017.

The Commission's proposal follows the “pilot project” on information exchange which was launched by five EU Member States (Germany, France, Spain, Italy, and the United Kingdom). These five EU Member States had announced their intention to cooperate on a “pilot multilateral exchange facility” through which they would exchange the same type of information among themselves as they will exchange with the US under FATCA. A driver of this initiative was to avoid the need to trigger the most favored nation clause. Recently, a number of other EU Member States have indicated their wish to join the pilot project. The Commission's legislative proposal offers EU Member States a means of carrying out this extended automatic exchange of information within an EU legal framework. The extension of the DAC would therefore effectively supersede this pilot in relation to the classes of income covered and it may therefore be assumed that these five large Member States support the Commission's proposal.

The Commission's proposal is also connected to recent international developments towards the automatic exchange of information. In February 2013, the G20 Finance Ministers committed to working towards making the automatic exchange of information the global standard and the issue is likely to be taken forward at the upcoming June G8 Summit and September G20 Summit.

Under European Union processes, the Commission will now submit its proposals to the Council and the European Parliament. Adoption may occur after the Council has received the “Opinion” of the European Parliament and a unanimous vote has been made by the Council.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United Kingdom), London
Global Leader – Tax Policy
  • Chris Sanger
    +44 20 7951 0150
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Munich
EU Direct Tax Leader
  • Dr. Klaus von Brocke
    +49 89 14331 12287
EY Belastingadviseurs LLP, Rotterdam
Tax Controversy Services
  • Arjo van Eijsden
    +31 88 407 8411
Ernst & Young LLP, Washington, DC
Strategic International Tax Policy Services Leader
  • Barbara Angus
    +1 202 327 5824

EYG no. CM3532